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National Report Regional Network - June 2003

Rogalandsforsking

In this round, which was conducted in May-June 2003, a total of 229 contacts in the regional network were interviewed. The following main points are based on the regional reports:

• None of the business sectors are generating growth impulses to the Norwegian economy. All sectors report that demand and output have not changed or are falling. This impression is reinforced by a low level of new orders for all business sectors and little desire to invest. So far, interest rate reductions have not increased investment optimism.
• The oil industry is stagnating as well, despite high oil prices in the period.
• Both export-oriented and domestically oriented manufacturing are experiencing unchanged output. Thus, it appears that export industries have recovered from the worst decline. Figures indicate, however, that parts of production are being maintained by reducing prices and margins.
• Standardised products that compete on the basis of price continue to lose export market shares, while niche-oriented exports tolerate high cost levels.
• The impact of weaker cyclical developments is spreading to the construction industry. So far this year, output has shown a falling tendency and the level of new orders is reported to be weak. Previous years' high levels of investment, particularly in commercial buildings, and subsequent overcapacity are intensifying this negative trend. This trend is taking root earlier in eastern Norway than elsewhere in the country.
• None of the sectors report an increase in employment. The primary focus, particularly in manufacturing, is still on cost and workforce reductions.
• The wage settlements so far support expectations of considerably lower wage growth in 2003 than in 2002. Increasing unemployment and weak market and profitability trends in a number of business sectors are contributing to this. In 2003, annual wage growth is expected to be 3.5% in the private sector and 4.5% in the public sector.
• All sectors report stable price trends. Operating margins are falling, except in domestically oriented manufacturing and the distributive trades, where margins are stable.
• Capacity utilisation has improved slightly since the last period as a number of companies are adapting capacity to lower demand.
• The labour supply is very good and represents no limitation to expansion.